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Eyewitness: Working Inside an Inland Empire Warehouse

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(This article was reported in partnership with the Investigative Fund of the Nation Institute. It first appeared on The Nation’s website and is republished with permission.)

The call from the temp agency comes in late October. I’ve passed the drug test, cleared the background check, sat down for a quick interview—“Can you lift fifty-pound boxes?”—and completed a worksheet of basic math problems. Now there’s a job. A warehouse just outside the city of Ontario, about forty miles east of Los Angeles, needs more bodies to meet the holiday crush.

They do work for Walmart, Best Buy, “all sorts of big companies,” says the female voice on the line. Orientation starts at 8:15 am; pay is $9 an hour. “Make sure you’re early.” Before hanging up she repeats the order. “Be early.”

On an overcast Tuesday, I pull into the parking lot, fifteen minutes ahead of schedule. Looming to my left is a giant rectangle of windowless cement. At 800,000 square feet, the warehouse is the size of Madison Square Garden, big enough that any misplaced products are as good as lost. I get my picture snapped for an ID badge and join thirty other new hires in the cafeteria. It is a diverse group, evenly divided by gender, mostly Latino but with a fair number of whites and blacks. As we sit, several men swap rumors of better opportunities elsewhere: a warehouse where pay starts at $12 an hour, another with productivity bonuses that can boost hourly wages to $15. But those are direct hire positions, and hard to land. During my job search, each warehouse I visited gave directions to the nearest temp agency.

After waiting twenty minutes, we are ushered into a room upstairs. A woman from the agency hands each of us a time sheet. For the sign-in, she tells us to write 8:30. “I know you were told to be here at 8:15,” she says, anticipating a protest that never comes, “but that was just to make sure you got here early.”

And, like that, fifteen minutes are lopped from our paycheck. It’s a small but important lesson in what it means to be a “flexible” worker. We are not in control here. Shifts may last four hours, eight hours or twelve; start times will bounce around as well. I’m originally hired for a shift that begins at 7 am, but that later moves up an hour, to 8, and then, in a rush to move goods out the door, to four o’clock in the morning. In the online world of holiday shopping, where demand can surge and retreat with the click of (many) buttons, workers must respond in real time, shoving other commitments aside. For people without cars, the ever-changing schedule makes it hard to coordinate transportation. One middle-aged woman, caught off guard on a day we’re dismissed at noon, will spend three hours walking the eight miles home. That she returns for the next shift—rubbing her feet and complaining under her breath—is a testament to her “flexibility,” to how far she’s learned to bend in the new economy.

A man I’ll call Brian (I’ve changed the names of people at the warehouse) takes over. He works for Ingram Micro, the warehouse operator, which he tells us is a “pretty big company.” (In fact, it’s the largest distributor of electronics in the world, with $37.8 billion in revenue last year.) Brian has a boyish face, wears an orange polo shirt and does his best to inject some passion into the room. “You guys are here to work—that’s awesome!” he calls. Blank stares. “We want people who want to be here!” Some fidgeting. He seems to be a nice enough guy, but it’s a tough crowd for a pep talk.

So down to business. Lesson number one: safety is a top priority of Ingram Micro. “We are constantly having people get hurt because they are working too fast,” Brian says. “You don’t get paid enough to get hurt.” (Someone behind me mutters, “You got that right.”) Brian walks us through the proper way to pick up boxes, and holds up a poster that illustrates safe stretching techniques.

But it’s a complicated message Brian is preaching. Why, after all, are people working too fast? Why did the employee in Brian’s lead anecdote try to slide under the conveyor belt—busting his head open in the process—instead of simply walking around?

Well, there’s this: the output for each employee, tracked at every moment via our scanning guns, will be posted daily. “All supervisors see are numbers, numbers, numbers,” he tells us. “So are we going to push you to work faster and be more productive?” The man to my left dutifully nods. “Yes, we are. Does the company expect you to pick up and carry fifty-pound boxes? Yes, it does.” Pause. “But we don’t expect you to carry them half a mile.”

Before we’re dismissed, the temp agency staffer returns with some final words of advice. Anyone who misses a shift on Thanksgiving, Black Friday, Cyber Monday or Christmas Eve is out. Anyone who isn’t performing at 100 percent efficiency by the third week will be given one week to improve, and then is out. On the bright side, a few “top performers”—perhaps 150 of the 800 temps they’ll hire by Thanksgiving—may get to stick around after the holiday season and avoid the mass layoffs. “Some people even get hired permanently by Ingram Micro,” she says. Such a promotion, she tells us, would include raises and benefits. The emphasis is hers. She makes the words sound like exotic treats.

But we shouldn’t get ahead of ourselves. Just this morning, she let someone go who was performing only at 20 percent. It won’t be easy to meet our efficiency goals, she acknowledges. “It sounds like a lot,” she tells us, “but it’s possible.”

* * *

With a day off before work begins, I use the time to tour the area. The warehouse sits in the middle of the Inland Empire, a sprawling and fast-growing region that includes Riverside and San Bernardino counties. Of late, the area is best known for having taken the Great Recession square on the nose. The housing bust left the region short more than 70,000 construction jobs and with some of the highest foreclosure rates in the nation. Signs of recovery are hard to spot. Today, nearly one in five Inland Empire residents lives in poverty—highest among the nation’s twenty-five largest metropolitan areas—with unemployment at 10.4 percent.

It is against this bleak backdrop that a fantastic warehouse boom is under way. No area in the country is experiencing faster industrial growth, with warehouses occupying more than 400 million square feet, about the size of 7,000 football fields. The primary reason for the boom: Los Angeles is crowded, but the Inland Empire, in the words of John Husing—an economist with the Inland Empire Economic Partnership—has plenty of “dirt.” Land is cheap and plentiful, allowing for structures large enough to handle the flow of goods arriving from overseas. More than 40 percent of US imports pass through the Long Beach and Los Angeles ports, and three-quarters of those products enter Inland Empire warehouses, where they are unloaded, reloaded and shipped out again. If you own stuff made in China—the phone in your pocket, the shoes on your feet—chances are good that some of it passed through an Inland Empire warehouse.

The newest surge of growth is being driven by fulfillment centers catering to online shoppers. In 2012, the US e-commerce market accounted for $365 billion in sales, growing at a rate seven times faster than US retail spending. Just last year, Amazon moved into its first Inland Empire facility and recently announced a second. Despite the sluggish overall economy, demand is so high that most of the new construction is speculative. As one broker told the Los Angeles Times, “The Inland Empire is to industrial real estate what downtown Manhattan is to office real estate.”

On the ground, the results of all this activity aren’t especially pretty. Warehouses have about as much character as giant curbs—some are half a mile long—and have been plopped down along dusty roads in the desert. On my driving tour, I repeatedly get lost in the swirl of industrial parks, my only traffic companions the endless stream of big rigs going to and fro. But these parks are more than just aesthetic hazards. Air quality here is among the very worst in the nation—thanks in part to the diesel exhaust—leading stunted lung growth among local children.

For some, after the loss of so many good-paying construction jobs and decades of manufacturing decline, the logistics industry represents the region’s best shot at prosperity. Economist John Husing has studied the region for decades. During an interview, he notes that the majority of the jobs are available to people with high school diplomas or less, and that—unlike fast food work, for example—they can put folks on the path to the middle class. State data find that the average wage for logistics workers in the Inland Empire is nearly $45,000.

But Juan De Lara, an assistant professor at the University of Southern California, contends that such a rosy conclusion comes from conflating the white-collar jobs in the industry—managers and logisticians, for example—with most other warehouse employees: the folks who snag your online orders from shelves, load boxes onto pallets or drive those goods away on forklifts. Isolating for these positions, De Lara arrived at a median annual income of just $22,000. And it’s worse for temporary employees, who make up a significant portion of the workforce, especially during the holiday rush. For warehouse temps—like the crew of thirty folks I’ve joined at Ingram Micro—annual median wages come to a mere $10,067. Even a typical farmworker makes more.

The growth of temp work isn’t limited to warehouses, of course. Over the last several decades, cost-cutting companies have transformed many stable blue-collar jobs into temp positions, complete with sporadic hours, low pay and no benefits. Manufacturing has been hit especially hard: only one in forty-three manufacturing positions was temporary in 1989; by 2006, the figure had risen to one in eleven. And alongside the hollowing out of blue-collar jobs has been an explosion of low-wage jobs generally. According to the National Employment Law Project, such low-wage positions are responsible for three-fifths of all new jobs created since the recession.

* * *

Early the next morning we shuffle into a small warehouse across the street from the main building. Although many of us have been hired to work in the larger facility, we’re needed right now for what is being called the “Apple project.” We empty our pockets and pass through a security checkpoint, following a supervisor along a path of yellow lines. Men and women zoom past on forklifts and cherry-pickers, beeping incessantly as they carry pallets of boxes to load onto towering metal shelves. On the way, I chat with a blond woman who previously worked as a security guard for $9 an hour. Covering the graveyard shift, she arrived home just as her husband was heading to work, which left her in charge of their three young children. “Didn’t sleep too much,” she says.

We stop at a clearing in the middle of the warehouse, in front of three assembly lines. Surrounding the lines are boxes filled with thousands of Apple’s newest release, the iPad Air.

The iPads are fresh from China, looking sleek in shrink wrap. Our task is to box the units for individual shipping. At the front of the line, an address label is scanned and slapped onto a slender cardboard box, and the iPad is stuffed inside with extra padding for the edges. The boxes are then sent through a taping machine and loaded onto pallets for shipping.

I take a slot at one of the taping stations next to Mike, an older man with an impressive white beard. Soon hundreds of boxes are headed our way on rollers, and we fold the top and bottom flaps rapidly and shove them into the taping machine. It’s easy work, until it’s not. Despite our frenetic pace, boxes pile up behind us, each representing a customer eager to receive the newest Apple toy, which goes on sale tomorrow. Even in the cold building, sweat begins beading on my forehead. After an hour my hands are stiff. The rough edges of the cardboard leave painful nicks along my index fingers. By noon they’ll be bleeding.

Seeing the overflowing line, a supervisor bounces over, eager to motivate. “Come on, tapers, I need you to go faster!” Mike—who I’ve learned is no stranger to warehouse work—locks eyes with him, keeps his face blank, says nothing, maintains his pace. It’s subtle, but I’m witnessing a conversation of sorts. The supervisor backs off. Score one for the temps.

The iPads we’re packing are the 64GB models and sell for $699 at Apple.com. At $9 an hour, that’s about two weeks of our paycheck. This fact doesn’t seem to be lost on the security guards, one of whom paces around our line for nearly an hour. Each time I look up, his eyes are locked on us, causing me to wonder if in the chaos of packing I’ve somehow lodged an iPad in my rear pocket. “Go ask him what the fuck his problem is,” Mike says to me, a bit too loudly.

Our first break comes thanks to a malfunctioning label machine, which a supervisor scurries over to attempt to fix. (The slow speed of the printer allows for impromptu breaks throughout the week. “We want to work faster,” a supervisor tells me, sounding apologetic, “but we can only go as fast as the labels print.”) On the way out we run the security gantlet again. This time I set off the sensor with the plate and screws in my collarbone from a bike accident. I raise my arms to be wanded down and am told to take off my shoes and shake them out. Finally free to go, I grab my things. “Hey wait,” calls the guard. “Can you open your wallet for me?” I open it, show him the only contraband I’m carrying is a dollar bill, and finally make it to the break room. “This place isn’t playing,” says a temp who watched the ordeal.

* * *

If warehouse jobs serve as pathways to the middle class, someone forgot to hand out road maps to my co-workers. During my time at Ingram Micro—which is divided between getting the iPad Airs out the door and packing boxes full of products mostly destined for Walmart.com customers—I’ll learn that many of my co-workers have spent years bouncing from one temp assignment to the next. “They say they might keep you on past the holidays,” a woman named Martha tells me, “but they never do.” It makes for stressful living—weeks of steady, if low-paid, work can be followed by weeks, or months, of next to nothing—but in a region with high unemployment, there aren’t many other options. Temp work is the main game in town. One count puts the number of staffing agencies in Ontario at 275.

In the smaller warehouse, our shifts are dedicated to the iPad Air launch. A supervisor usually paces the floor while we work, occasionally calling us together to tell us to pick up the pace, or informing us of our output. (“You’ve done 18,000 units—good job!” he says after one shift, a rare word of praise.) Except when we’re waiting for pallets to arrive, we’re constantly in motion. The burliest folks in our group, men with veined forearms who drink workout shakes during breaks, take the assignment in stride. But others—like me—are soon complaining about sore hands and wrists, along with aching feet. As the line hums, workers steal a second here or there to stretch their hands and grimace. But the boxes don’t stop, and neither do we.

“Years ago, I made $12 an hour at a warehouse,” says Carlos, an immigrant from Mexico City, during a break. “Now look at what they’re paying.” To make ends meet, he picks up side jobs as a carpet cleaner, while his wife works at a Ross distribution center in nearby Moreno Valley, earning just $9 an hour as well. “That’s why you’ve got people going back to Mexico. The jobs here don’t pay enough.” Learning new skills can help, a little. At Ingram Micro, temps trained to drive forklifts earn $10 an hour.

The fluctuating schedule makes any work-life balance nearly impossible. At the end of one shift, we’re told to report the next day, a Saturday, at 4 am. Although there is some grumbling—“I didn’t sign up for this,” one woman complains—everyone is lined up for roll call the following morning. I stand next to Carlos, who looks exhausted. Last night, he had taken his two kids to Disneyland. He got home from the amusement park at 2 am, dressed for work and headed back out the door. “Time goes by really fast when you have kids,” he tells me, saying he has no regrets about the decision. “This is the time to be with them.”

* * *

The problems of warehouse work—the low wages, the mad pace—are all too familiar to Javier Rodriguez. Originally from Mexico, he found construction work in the Inland Empire and for a time was pulling in $25 an hour. But jobs dried up after the housing bust. He wound up as a temp at a nearby warehouse in 2012, driving a forklift for $10 an hour, when a group of blue-shirted workers stormed into the building.

“I was watching and wondering, ‘Who are they?’” remembers Rodriguez. “That’s when the rumors and stories started that they were with the union.”

The rumors turned out to be true, and Rodriguez signed up right away. He worked at a warehouse operated by a company named NFI, dedicated to moving Walmart goods. “You feel like you’re doing a good job, but they are always putting pressure on you to go faster,” he says. A supervisor insulted him; the heat in summer was unbearable; the water given to workers wasn’t clean. And, of course, the low wages. To make ends meet, Rodriguez had taken on a second warehouse job, and was putting in seventy hours a week. “I’d only get to see my wife and kids on the weekend,” he says.

The blue-shirted workers were members of Warehouse Workers United, a project launched in 2009 by the Change to Win labor coalition. The group seeks to get an organizing toehold in the fast-growing industry and has filed numerous lawsuits against warehouse operators, alleging rampant wage theft and dangerous workplace conditions. But WWU aims to broaden the target, moving up the supply food chain to the companies that use warehouses—known as “third party logistics providers” (3PLs)—to transport their goods. And they’re starting with the biggest target of all: Walmart. Their efforts got a big boost earlier this year, when a federal judge allowed the retail giant to be added to a class-action suit alleging widespread wage theft against Schneider Logistics and three staffing companies, in a warehouse exclusively dedicated to Walmart merchandise.

“When workers began coming to us and complaining, the common thread was Walmart,” says Guadalupe Palma, WWU’s campaign director. “As the biggest retailer, they have a responsibility to improve the conditions. These could easily be good jobs.”

But there are significant challenges to organizing the industry. “Because of the temp nature of work, it’s very easy for a worker who speaks out to be retaliated against,” says Palma. “They might not be called back to work the following day, or have their hours decreased.” That’s exactly what happened to Rodriguez, according to the WWU. After he spoke to the media and participated in strikes over unsafe workplace conditions—leading Cal/OSHA to fine the warehouse nearly $30,000—he was fired earlier this year. Federal charges have been filed against the company, alleging retaliation, and an investigation is under way.

Though out of work, Rodriguez is surprisingly upbeat. “The warehouses aren’t bad,” he tells me. “If they treat people better and pay us what we’re owed, the work could be very good. It is honest work. The workers are very dedicated. But right now, others are getting rich off jobs that pay us misery wages.”

* * *

One morning I am told to report to the larger warehouse. I wait for a supervisor near the security checkpoint, in front of a digital display that lists the number of days since an accident. Today it reads: 4.

When I follow the supervisor through the vast building, it’s easy to see how people can get hurt here. In the “picking module,” employees dart around snapping up products for online orders, a slip away from a sprained ankle or worse. (“Work there if you want to lose weight,” someone tells me.) Shelves tower overhead, filled with pallets loaded with heavy boxes. They fall, you’re crushed. I will witness one such near miss, when a heavy box topples from a raised forklift, sending a loud boom through the building. Thankfully, no one was underneath. As we make our way to the rear, we have to sidestep workers driving forklifts and cherry-pickers—the latter used to reach the highest shelves—zipping around the tight spaces.

We head up a flight of stairs to the packing area. A series of conveyor belts are filled with boxes, most reading Walmart.com on the side. The boxes, filled with an endless array of products, must be stuffed with brown packing paper, folded and shoved through a taping machine, after which they’ll continue on their journey through the building. Initially, the pace seems sustainable. Every three seconds or so a new box arrives, and I feel oddly content with the small role I’m playing to keep the online shopping beast humming along. Electric blankets and Teenage Mutant Ninja Turtles. Diaper Genies and vibrating baby chairs. Backpacks, keyboards, extension cords. Some of the product combinations are intriguing: the person, for example, who needs a tent and a printer cartridge. Judging by the sheer number of items for kids—My Little Pony, Elmo, a host of characters I’m too out of the loop to identify—by early November parents are already deep into Christmas shopping.

Then comes a collection of toy cars that, no matter how hard I try, refuse to fit into the box they’ve been assigned. I put the carton aside, several precious minutes wasted, and see that my conveyor belt is really backed up. I know such a sight often prompts a visit from a supervisor, so I begin to hustle.

The boxes start flying by. Pack-fold-tape, pack-fold-tape. At this speed, my powers of observation have left. No longer do I care about the product, or pause to imagine the customer; my thoughts, such as they are, tend toward “Here comes another box of crap.” This goes on for how long I don’t know, but at some point I realize that a light is blinking. I look up. I’ve been so focused on dispatching the boxes, I’ve failed to realize that the conveyor has jammed in front. As far as I can see, the packed and taped boxes are frozen in place, some mashed together in a way that is unlikely to cause “customer delight,” which is the number-one goal here at Ingram Micro. I look around for guidance. Not a supervisor in sight. My hands are bleeding again, rubbed raw by the cardboard. Unsure what else to do, I take my break and go to the bathroom to wash off. Unlike my co-workers, I can afford to get fired.

* * *

On the final day of the iPad project, a young worker to my right calls my name. We’re both doing the same job at the end of parallel lines: grabbing boxed iPads after they’ve gone through the taping machine and stacking them on pallets, to be loaded onto trucks and delivered to customers. There’s a sign on the taping machine, warning us to keep our hands away. Previously, an extension allowed the iPads to exit the taping machine and land on a platform. But today the extension has disappeared, and we have to snag the boxes as they emerge from the machine to keep the precious cargo from falling to the ground.

“Yo, Gabe, can I get some help?” I scamper over. While grabbing an iPad, his sweatshirt cuff has become trapped in the revolving gears of the belt, threatening to suck his hand into churning metal. As he yanks, I pull the machine in the opposite direction, and after a moment of struggle he’s free. A few seconds of “fuck that was close” breathing follows. His wrist is bright red. Then he rolls up his sleeves and, seeing more iPads on the way, gets back to work.

(Gabriel Thompson is the author of Working in the Shadows . He is working on a biography of Fred Ross—the legendary organizer who trained Cesar Chavez—titled, America’s Social Arsonist.)

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Labor & Economy

Is Tesla a Promise or a Problem for Rebuilding the Middle Class?

In Robert Jimenez’s day, California was second only to Michigan in auto manufacturing, and homeownership was a much more attainable aspiration. “We are what’s left of the middle class,” he says.

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Photo: Cindy Chew

Can an industrial giant like Tesla be a factory for middle-class jobs?


 

Both Michael Sanchez and Robert Jimenez owe their fortunes to California’s auto industry. But their personal and professional trajectories couldn’t be more different.

Sanchez, a Tesla an assembly line worker, is on a leave of absence due to chronic back pain from a repetitive-motion injury that sidelined him two years ago. He and his wife, Mona Liza Sanchez, rent a “very old broken-down” house in Hayward. Homeownership in Northern California’s pricey East Bay is not on his radar, even in this blue-collar suburb south of Oakland.

They lavish their affections on “our babies,” by which Sanchez, 39, means their cats and dogs. Their economic situation has caused them to delay starting a family.


Source: California Budget & Policy Center analysis of U.S. Census Bureau, American Community Survey and Decennial Census data.

Note: “Middle income” is defined as having household income that is two-thirds to twice the median household income for the county of residence.


Meanwhile, Jimenez, who retired in 2005 after 35 years at a Chrysler-owned supplier in downtown Los Angeles, owns a house Montebello, just east of Los Angeles, and put his two children through college. His career flourished during the auto industry’s golden age, which began after World War II and was nourished by the federal government’s massive investment in road building. In Jimenez’s day, California was second only to Michigan in auto manufacturing, and homeownership was a much more attainable aspiration. “We are what’s left of the middle class,” he says.


Elon Musk’s labor intransigence could upend a decades-old social contract
between employers and workers.


Investment analysts scrutinized Tesla’s announcement, made earlier this month, that it met its 2018 production goals for the mass market Model 3, after the company blew past deadline after deadline. But another critical question looms for taxpayers who, according to a 2015 Los Angeles Times analysis, have invested nearly $5 billion in public aid to Musk’s companies. Can an industrial giant like Tesla be a factory for middle-class jobs – or has the very nature of manufacturing irrevocably changed since the 1960s, when Robert Jimenez first went to work in the auto industry?

Back then, more than 60 percent of California households could be considered middle income, according to Sara Kimberlin, senior policy analyst with the non-profit California Budget and Policy Center. By 2016, that number had dipped to below 50 percent. Some of the decline can be attributed to the loss of thousands of manufacturing jobs, many of them high-paying union jobs, like the ones that afforded Jimenez and his family a piece of the California Dream.

The 2010 opening of the Tesla plant in a shuttered Fremont auto factory gave hope to Sanchez, who, unlike Jimenez, went to school to study the auto trade. He was hired initially as a temp for $17 per hour in 2012. It took him three-and-a half years to earn his first raise, a feat he says he accomplished by sending emails to Musk, the human resources department and “everybody in between.” When he injured himself, Sanchez was making “$20 per hour and change” on the night shift. The starting wage at Tesla has since been raised to $19 per hour.


A successful California union drive could “serve as a model for jump-starting the middle class.”


By contrast, Sanchez’s wife, who is 40, had earned $34 per hour after five years of working on the assembly line at the same plant when it was unionized, according to Sanchez. She left the Fremont factory in 2009, when it closed. It had been operated by Toyota and General Motors in a joint venture.

An overriding concern of Michael Sanchez has been Tesla’s alleged lack of attention to safety. Sanchez worked on the luxury Model X’s underbody with his arms always above his shoulders, his neck straining as he looked up. Tesla should aim to “[make] it where people’s bodies are not going to break down as time goes on,” he says.

Sanchez fell back on a tried-and-true method of raising workplace standards. In the summer of 2016, he joined the United Auto Workers’ effort to unionize the Fremont factory, which currently employs 10,000 people and is California’s sole auto manufacturer. Plant safety is one of the UAW’s chief organizing issues at Tesla, which has received media attention for its higher than average rates of serious injuries, and for injury-reporting lapses, which the company disputes. A successful union drive could also “serve as a model for jump-starting the middle class” in California, according to Harley Shaiken, a University of California, Berkeley professor who specializes in labor and education.


“Imagine if Tesla goes under tomorrow — do you want to lose your job and lose your investment?”


In fact, labor advocates have long argued that unions benefit workers more broadly. A recent study, published by economists Henry Farber, Dan Herbst, Ilyana Kziemko and Suresh Naidu, draws from early polling data to show that high rates of unionization lead to lower levels of income inequality across the board. Shaiken also claims that the benefits of unionization would not just accrue to the workforce but to the company as well. A union could ensure that workers “speak more freely, more openly, now making things more effective in the production process,” he says.

Musk has not greeted the union effort warmly. In May, he wrote on Twitter: “UAW destroyed once great US auto industry & everyone knows it.” He also tweeted that those who joined the union might “give up stock options for nothing,” referring to an employee benefit currently available to all Tesla workers: an equity grant, which vests over a four-year period, and stock they can buy at a discount. The UAW charged that Musk’s statement was an act of retaliation against employees for union organizing and a violation of labor law, in a complaint filed with the National Labor Relations Board in May.



Source: Union Membership and Coverage Database, available at www.unionstats.com, compiled from the US Census Bureau’s Current Population Survey by economists Barry Hirsch of Georgia State University and David Macpherson of Trinity University.


Peter Leyden runs Reinvent, a media company that moderates roundtables with tech entrepreneurs and political leaders concerned about sustainability and the future of work. On the matter of compensation, Leyden suggests that having employees hold an equity stake in the company offers “a different way to think about your involvement at the company” that is “more geared toward the future” than bargaining for wage increases. The growing value of Tesla’s stock, Musk argued in a blog post to employees last year, can make its workers wealthier than their counterparts in unionized plants.


The path to the middle class is not as clear as it once was. The UAW has recently lost votes in right-to-work Tennessee and Mississippi.


Yet Jon Luskin, a certified financial planner at Define Financial, based in San Diego, believes employees are better off with higher wages than stocks. He urges Tesla employees to sell their stocks as soon as they vest. “Imagine if Tesla goes under tomorrow — do you want to lose your job and lose your investment?”

Shaiken says employees should not have to choose between unionization and having a stake in the company’s success. He points out that workers at General Motors, which is covered by a union contract, took home almost $12,000 extra this year due to a profit-sharing deal with the company.

Early last year Michael Sanchez was leafleting the Fremont factory as a volunteer UAW organizer when security guards ordered him to leave. One guard told him that “unions are worthless,” according to testimony that he provided to an administrative law judge during a trial before an NLRB-appointed judge in June, the San Francisco Chronicle reported. The NLRB’s general counsel says the company violated federal law that protects workers’ rights to act collectively. Hearings on the matter are expected to resume in September.


“If you’ve got a kid and mortgage and car payment, you need a predictable income.
That’s what unions do.”


“This has all the hallmarks of 1930s resistance, in the 21st-century context,” says Shaiken. He adds that such resistance could have “real consequences” beyond Tesla, upending a decades-old social contract between employers and workers.

“No one at Tesla has ever, or will ever, have any action taken against them based on their feelings on unionization,” Tesla said in a statement to the NLRB last year.

Of course, the path to the middle class that Robert Jimenez helped forge is not as clear as it once was. When he helped organize the Chrysler-owned auto parts supplier in 1968, union membership in the state stood at about 32 percent. Last year, only 16 percent of California’s workforce belonged to unions, and the union membership rate is far lower in the private sector. The UAW has recently lost votes in right-to-work Tennessee and Mississippi.

Peter Leyden characterizes unions as appropriate for 20th-century mass production, but anachronistic in contemporary high-tech manufacturing. He envisions a “new model” of labor-management relations that he describes as “flexible, adaptable, risk-taking” and “in sync with the entrepreneurial and innovative instincts of the people running the companies.”

But Nelson Lichtenstein, a UC Santa Barbara historian, argues that Musk is shifting risk onto workers rather than encouraging experimentation, since employees who feel less secure in their jobs will be reluctant to speak up. “If you’ve got a kid and mortgage and car payment, you need a predictable income. That’s what unions do,” he adds.

It is Musk and other union critics, says Shaiken, who promote false and outdated notions of auto unions, which often work collaboratively with the companies they represent. As an example, he cites the former General Motors and Toyota joint venture that previously ran the Fremont plant, where “constant improvement was the goal.” Tesla, he claims, is pursuing a “hard ideological argument rather than a pragmatic, high-tech way” of identifying how to optimize the production process and valuing workers at the same time.

“A competitive, profitable Tesla and a union are not incompatible, but that’s up to the workers there,” he says.


Research assistance provided by Jake Conran.

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Labor & Economy

The ‘Amazon Tax’ Ruling: Disrupting the Disruptors?

Amazon’s continuous resistance to collecting sales taxes made it the first major American company to build its business based on tax avoidance. Contrary to popular belief, the company is still resisting today.

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An Amazon fulfillment center. (Photo: Doug Strickland/Chattanooga Times Free Press via AP)

Amazon gathers sales taxes on products it manufactures and sells directly, but doesn’t collect on behalf of third-party businesses that use its marketplace.


On June 21, the Supreme Court changed the face of online retail, upholding a South Dakota law requiring any business making at least 200 transactions or $100,000 in sales to collect state sales taxes, even if it has no physical presence within a state’s borders. This ends a structural pricing advantage that made the Internet the world’s largest duty-free shop, at the expense of every restaurant, clothier, hardware store and pharmacy whose e-commerce rivals could always charge less.

The decision came too late for brick-and-mortar businesses wiped off the map in the retail apocalypse. It came too late for state and local governments losing between $8 billion and $26 billion per year in never-collected sales taxes — money that could have built roads, improved schools or bolstered the safety net. But now that it’s here, states have choices to make.


Thin profit margins and cutthroat practices pit Amazon’s third-party sellers against each other.


The Supreme Court merely validated South Dakota’s law; other states must pass their own legislation to enable sales tax parity between online and offline businesses. And given the burden of complying with state tax laws, it seems at first blush tricky to design something that allows smaller retailers to still compete with the big boys.

But one California official has a solution that she’s been advocating for several years. It would maximize revenue for states, reduce the load on small sellers, and create a truly level playing field. However, Board of Equalization member Fiona Ma’s strategy requires that California join the tiny number of states willing to stand up to the 800-pound gorilla of online shopping, the source of nearly half of all e-commerce sales: Amazon.

Amazon often receives plaudits for voluntarily collecting sales tax in all 45 states that have one. But such praise ignores Amazon’s scofflaw history. “Amazon was the first major American company that built its business based on tax avoidance,” said Oren Teicher, CEO of the American Booksellers Association, referring to the company’s continuous resistance to collecting sales taxes. Contrary to popular belief, the company is still resisting today.


Jeff Bezos notes that third-party sales represent more than half of the total units sold on Amazon.


While Amazon gathers sales taxes on products it manufactures and sells directly, it doesn’t collect on behalf of third-party businesses that use its marketplace. (Technically, online shoppers are supposed to report untaxed items and pay the taxes; in reality, nobody does.) This may sound like a minor point, but in his annual letter to investors, CEO Jeff Bezos notes that third-party sales represent more than half of the total units sold on Amazon.

Amazon offers essentially no tax assistance to third-party sellers, save for a couple of dry documents on its website. Third-party Amazon merchants can theoretically sign up for tax calculation services, but they must still register with states and file taxes on their own, in potentially thousands of jurisdictions. When states tried to get third-party sellers to collect, Amazon didn’t want any involvement with the effort and refused to publicize it.

The American Booksellers Association recently described the Amazon marketplace as the “Wild West.” Third-party sales on the website doubled in volume from 2014 to 2016. The marketplace puts legitimate, authorized re-sellers and brick-and-mortar retailers alongside counterfeiters, scavengers who re-sell liquidated inventory, and Chinese and Indian importers. It’s nearly impossible for consumers to tell the difference. Thin profit margins and cutthroat practices pit sellers against each other; a merchant who decides to collect sales taxes will lose out to tax-avoiding rivals.

With Amazon reluctant to police its marketplace, such tax avoidance is rampant. A 2017 Government Accountability Office report estimated that third-party sellers collect tax on only 14 to 33 percent of all sales. Sellers have basically followed Amazon’s tax-avoidance path, determined to run afoul of the law.


There’s a simple fix to all of this, says the Board of Equalization’s Fiona Ma: ‘Whoever’s collecting the money should collect the sales tax.’


The big winner in all this is Amazon, which reaps large fees from third parties for access to its platform. Amazon typically takes 15 percent of gross third-party sales and sometimes as much as 20 percent, with fees on top of that for handling and shipping through the “Fulfillment by Amazon” network. This revenue pot has grown from $16 billion to $31 billion in just two years, according to Amazon’s financial disclosures. It’s highly likely that Amazon clears more profit than marketplace sellers on their transactions. So Amazon, by proxy, benefits financially from third-party tax avoidance, and the pricing advantage it provides. And, by not collecting tax, Amazon even avoids liability for mistakes made by third-party sellers that could trigger audits.

There’s a simple fix to all of this, as Fiona Ma stated plainly to me: “Whoever’s collecting the money should collect the sales tax.”

Ma, who is likely to become California’s next treasurer, spent years working on state tax issues as an Assemblywoman. In May 2016 she was serving on the Board of Equalization, which at the time oversaw state sales taxes. A Delaware business that used Fulfillment by Amazon (FBA) services told her it only learned it was responsible for sales tax collection after receiving a bill for three years of back taxes.


Amazon VP on the company’s duty to collect sales taxes:  ‘Well, if the state of California forces us to, I guess we can.’


“I found out that third-party sellers don’t actually know they should be collecting and remitting taxes to California,” Ma said. And while researching the matter, she learned that through its website and FBA, Amazon handled storage, packaging, payment processing, logistics, delivery, customer service and returns. That Amazon wouldn’t also collect the sales tax seemed odd.

In January 2017, Ma flew to Seattle to meet with Kurt Lamp, Amazon’s Vice President of State Tax and Tax Operations. She began by asking Lamp how third-party sellers were supposed to know about sales tax collection. “He said they sign an agreement and there’s a website,” she recalled. “I said, ‘Are you sure everyone’s doing this?’ He said, ‘We don’t know — we tell them to go to the website.’”

Ma found Amazon’s reticence alarming. “I said come on guys, that’s ridiculous, why can’t you collect the sales tax? You’re dealing with everything on the customer level. He said, ‘Well, if the state of California forces us to, I guess we can.’”


Some state officials put the annual amount of revenue lost to uncollected third-party sales taxes at $1.8 billion.


Two months later, a report from a news publication, The Capitol Forum, estimated that California loses $431 million a year on third-party seller tax avoidance. Other state officials have put the number even higher: $1.8 billion in lost revenue every year. Ma couldn’t believe that Amazon’s attitude was essentially, Who cares?

Last August, Ma wrote to state Cabinet Secretary Keely Bosler, asking that Governor Jerry Brown demand Amazon collect sales tax on all orders within the state, requiring California to audit only one company, Amazon, instead of thousands of third-party sellers. This would also pull in millions of transactions that wouldn’t otherwise be captured; just 20,000 third-party sellers generated over $1,000,000 in revenue last year, according to Amazon, and most states wouldn’t audit businesses smaller than that. Plus, taxing all sales would create more equal treatment between Amazon and the state’s local businesses, which create far more jobs and property taxes than Amazon’s handful of warehouses.

Other states have gone this route. In Washington and Pennsylvania, Amazon and other platforms are responsible for collecting all relevant taxes on third-party sales. A similar law in Minnesota kicked in July 1, after the Supreme Court decision.


Why has California been reluctant to force Amazon’s hand? “Number one,” says Fiona Ma, “the governor’s office has been trying to woo Amazon into putting a headquarters here.”


Tellingly, Amazon does not charge sellers anything for this service in Washington and Pennsylvania. The tax itself is just a pass-through to customers, and since Amazon already collects on its own purchases, collecting for third parties represents merely flipping a switch. “They have all the infrastructure, it can’t be very difficult to do,” said Darien Shanske, a law professor with the University of California, Davis.

Amazon has argued that the company is prevented from collecting on behalf of third parties unless states pass marketplace laws like Washington’s or Pennsylvania’s.

But California has not taken Ma’s advice and forced Amazon’s hand. In fact, over the past year the state has become more aggressive against third-party sellers.

Last July responsibility for sales tax oversight shifted to the California Department of Tax and Fee Administration (CDTFA). That department has been threatening third-party sellers with fines and even prison time if they didn’t start collecting sales tax. “Operating unlawfully you can be prosecuted,” reads one email to an Amazon seller, who asked that his name be withheld. The back taxes demanded would bankrupt his business, the seller claimed. “The whole thing is taking a really hard toll on me,” he said. “It’s stressful, I wake up in the night, I cannot get back to sleep.”

CDTFA spokesperson Paul Cambra would not tell Capital & Main how many threats like this have gone out, but the Sacramento Bee put the total at 2,500. Cambra admitted that the agency has not referred any Amazon sellers for criminal prosecution. But several posters on Amazon-seller message boards have complained and posted communications from the state. This January, the CDTFA sent letters to third-party sellers, citing sections of the state tax code to prove that they were liable for collection. A header in the letter, from November 2017, reads “Amazon Fulfillment Services, Inc. and Affiliates.”


Amazon has willingly handed over third-party seller data to states like Rhode Island and Massachusetts — helping them target its own marketplace partners.


Paul Rafelson, an attorney for third-party sellers, believes this indicates that Amazon drafted or supplied content for the letter. Cambra responded that the letter “was authored by CDTFA staff members” and “at no point was this letter reviewed or edited by outside individuals or entities.” That doesn’t totally answer whether Amazon had initial involvement in the drafting. Cambra added that the header “was inadvertently left from a previous document.” CDTFA denied a Freedom of Information Act request to obtain communications between its office and Amazon, terming it “confidential taxpayer information.”

Amazon spokeswoman Jill Kerr also said that the company “had nothing to do with that communication. Amazon did not play any role in that.”

In March Rafelson started the Online Merchants Guild, an association advocating for e-commerce sellers. He argues that registering with states and remitting dozens of income tax returns overly burdens small businesses, and that having Amazon collect is the simplest remedy. But he hasn’t had much luck convincing state officials. “When I go to a state like Massachusetts, Illinois, New York and say, ‘You can get Amazon to collect,’ they’re fighting me like I’m the problem,” he said. “Nobody wants to tick off Amazon.”

Amazon has even willingly handed over third-party seller data to states like Rhode Island and Massachusetts, helping them target its own marketplace partners. “It’s striking to me as a citizen that your state’s tax enforcement resources would be deployed [to] going after small fry instead of doing the obvious thing of getting Amazon to collect sales tax,” said Stacy Mitchell of the Institute for Local Self-Reliance, a frequent Amazon critic.

Ma finds the aggressive enforcement of small sellers, when Amazon controls practically every aspect of the transactions, to be unconscionable. But why has California been so reluctant to force Amazon’s hand? “Number one,” Ma explained, “the governor’s office has been trying to woo Amazon into putting a headquarters here. I’ve been pushing and they haven’t wanted to do anything up front.” Indeed, Los Angeles is on the shortlist for the massive HQ2 project.

California’s legislature must author a solution, after the Supreme Court ruling, if the state intends to collect online sales taxes. But Ma wonders whether it will melt under pressure as well. “Republicans are not going to want to do it, and Democrats would have to go against Amazon,” she said. “No one wants to do anything in an election year to stick their neck out.”

A spokesperson for Senate President pro Tem Toni Atkins said her chamber was “looking into next steps” on the issue. Assembly Speaker Anthony Rendon’s office didn’t respond to requests for comment.

This dynamic of apparent subservience to Amazon has played out throughout the country. When Amazon first agreed to collect sales tax, it cut deals with states to delay collection or forgive back taxes, dangling warehouses and jobs as incentives. Mississippi’s Department of Revenue admitted to a local TV news station last year that its agreement with Amazon to collect sales tax didn’t cover “any sales made by an independent third-party seller, even though made through the Amazon marketplace.” That enabled one Mississippian, Keith Bennett, to buy a laptop, mouse and bag worth several hundred dollars off Amazon and pay only $1.87 in sales tax; the computer sale went through a third-party business that literally named itself “Buy Tax Free.”


Sellers have been the foot soldiers for Amazon in avoiding sales taxes for years. Now Amazon has abandoned them to fend for themselves against aggressive state governments.


Backroom deals are bound to occur when a giant company with armies of lobbyists intimidates states from implementing simple solutions. Rafelson, the attorney for third-party sellers, called their plight ridiculous. “It’s like saying if you go to a Walmart in Georgia and buy a Coke, it’s not Walmart’s responsibility to collect the sales tax, it’s Coke’s!”

That’s not to say sellers are blameless. Many willingly followed Amazon’s model of avoiding sales tax to gain pricing advantage over rivals. “Sellers have been the foot soldiers for Amazon on this issue for years and years,” said Stacy Mitchell. Now Amazon has effectively abandoned them to fend for themselves against aggressive state governments. “If you sleep with thieves, they may well steal from you,” Mitchell said.

Only one state, South Carolina, has argued that existing law requires Amazon to collect sales taxes. The state filed a motion in state court, seeking as much as $500 million in uncollected taxes. Amazon is challenging the case, and a hearing is scheduled for November. “Under South Carolina law third parties are not considered sellers but suppliers or consignors; Amazon is the seller,” said Bonnie Swingle, public information director for the South Carolina Department of Revenue.

If South Carolina prevails, other states could potentially seek back taxes from Amazon, creating significant monetary risk, as Amazon has acknowledged in financial disclosures. But states focusing on third parties would relinquish a small fortune, while allowing Amazon to continue to undercut competitors.

Ma has devised an alternative strategy. She’s working with a number of attorneys, including Rafelson, who are considering filing a lawsuit against Amazon on behalf of third-party sellers. But the Supreme Court heard arguments that third-party sellers would suffer from the compliance burden, and dismissed them. Justice Elena Kagan suggested sales tax collection “would be essentially taken over by companies like Amazon… they would do it for all the retailers on their system.” Somebody might want to inform Amazon.


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Labor & Economy

America’s Middle-Class ‘Squeeze’

Alissa Quart’s new book examines the plights of women and men whose jobs have been devalued by the evolving American economy.

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Eric Pape

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Photo: Eric Pape

Today the struggling middle class is finding itself just a short rung above the working poor.


 

Bowed and vulnerable, with her head perched over the toilet, Alissa Quart was beginning to fully comprehend her precarious economic position.

An established New York-based freelance journalist, she thought of herself as a sturdy member of middle-class America seven and a half years ago, but she was going through a difficult pregnancy and was often too sick to work. “I was retching all the time, and I was watching as I spent my savings down,” she recalls during a recent interview.

Quart saw little potential for circumstances to improve for herself and her husband, another freelance writer, as they looked ahead to the costs of pregnancy, birth and parenthood: “I realized I could join the struggling middle class soon, if I didn’t wake up.” That rung of the middle class is just a small step above the working poor.

Yes, her family was in crisis mode.

She responded by doing something few people facing the personal shame of economic struggles do: She sought out people in similar circumstances around the country and painted an array of reportorial portraits of their troubling, sometimes poignant stories.

The result is her latest book, Squeezed: Why Our Families Can’t Afford America (Ecco/HarperCollins), about women and men whose jobs have been devalued by the evolving American economy. In it, she details their struggles to get by—or to pretend they still can—with stagnant or declining incomes, even as their basic costs surge.

Many of Quart’s subjects are people who would likely have done fine in an earlier era, but who now struggle with deep feelings of failure as they patch over the many holes in their finances. There is the adjunct professor on food stamps; the caregiver of other people’s children who rarely had time to see her own; the Southern California engineer who, after having a child, repeatedly changed professions in search of financial stability, and many others.

For middle-income America, she writes in Squeezed, professional and economic stagnation “is experienced as a great loss, as the end of the mobility and flexibility we saw in our parents’ lives. That mobility is so much a part of the American promise that losing it seems like a deep betrayal.”

Working While Pregnant

In Quart’s book, “middle class” refers to a majority of the upwardly mobile population who, by and large, long believed that if they worked hard and made smart choices, then their children would live better than their parents.

People in middle-class professions—teachers, firefighters, journalists, construction workers, cops and others—certainly never got rich from their work, but they could look forward to a time when they would be fairly comfortable and secure. More important, they rarely feared sinking into poverty.


Economic and professional mobility is so much a part of the American promise that losing it seems like a deep betrayal.


“You aren’t reaching for the stars; you’re reaching for the ceiling,” Quart says. “Now, you’re being punished for it.”

And that punishment comes in many forms, especially for parents. Quart lists the increasing costs of parenting—daycare, childcare, family healthcare and lower incomes, and an additional one just for being a mother. “Employers pay $11,000 less for working mothers starting out than for other women, and $13,000 less than men,” she says.

Quart notes that such discriminatory risks have led friends, acquaintances and interview subjects to hide their pregnancies in the workplace for as long as possible with oversized jackets, loose-fitting sweaters and baggy pants.

Donald Trump, during his days on The Apprentice, stated flatly that pregnancy is “an inconvenience” for businesses.


In New York City childcare is often the greatest single cost for families.


A paltry 16 percent of paid American workers enjoy paid parental leave, according to the Bureau of Labor Statistics. Quart interviewed one of the many women who set up GoFundMe pages to obtain donations to pay for their pregnancy leaves. (The United States is the only industrialized nation without paid maternity leave.)

And then there is childcare. In New York City, where Quart lives, it is often the greatest single cost for families. Some parents spend one of every $3 in take-home pay for a stranger to look after their kids, Quart discovered.

Economic ‘Prisoners of Love’

Quart’s book explores some of the ways that nurturing professionals are manipulated into working for less than they are worth. “The idea is that these people—nurses, teachers, childcare professionals—will be trapped by feelings of love, and they’ll work for lower wages,” she writes.

While that is a longstanding issue, today it comes with new twists. The ride-sharing company Uber realized that some of these workers desperately needed more money to get by—and that they were great for its brand—so they actively sought to hire teachers, Quart notes. As the brand established itself as a massive moneymaking machine, it made videos highlighting the company’s sociable and responsible teacher-drivers. In Oregon, Uber has even used an emoji showing a stack of books to signal to customers that a driver is also a teacher.


The gig economy is not an arrangement that allows people to survive.
It keeps people in place.


The problem, as Quart makes clear, is that such side hustles rarely come with health care and paid vacations for employees, nor do such gigs provide a way to “transcend their economic circumstances.”

“It is a sort of set-up. It is not an arrangement that allows people to survive,” she says. “They keep people in place.”

While Quart didn’t frame it this way, the prisoner-of-love thesis she examines in the book can be applied to many journalists.

Successful freelance journalists in the 1990s commonly earned $2 per word from magazines that, in many cases, now pay 50 cents. The number of editorial jobs at most of the print publications that still exist are almost universally a fraction of the size they were in the old days. The Los Angeles Times, which has lost nearly two in every three members of its editorial team since 2003, is one of countless examples. And the many digital media jobs that have sprung up almost invariably pay far less and come with weaker job security and fewer, if any, benefits.

Journalists who have stayed in their devalued field have generally done so because they feel their work is crucial to society.

Quart, now the mother of a young daughter, has stabilized her own family’s situation by diversifying. Her soft spot for creating solutions-oriented journalism has been bolstered by writing books and by her role as executive editor of the Economic Hardship Reporting Project.

Co-founded with old-school working-class muckraker and author Barbara Ehrenreich, the EHRP funds journalism focused on the sort of destabilized people Quart’s pregnancy brought her so much closer to. (Disclosure: the EHRP is supporting a small project proposed by this author; also, Alissa Quart is a member of this website’s board of directors.)

Reporting and writing Squeezed proved to be a revelatory experience for Quart and, she says, some of the subjects of the book. In sharing their stories, they came to see the broader context for their struggles, and that they are not failures.

Where does all of this leave the middle class?

“It is a fantasy category that has resonances of the past, but what I’m trying to do is help make that shift for people so they don’t blame themselves and don’t feel stigmatized,” she says. “They can’t own a home. They can’t have a career; they have a different set of jobs.

“I think books like mine are part of this process of getting people to see where we really are.”


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Judging Janus

After ‘Janus’: Labor’s Recommitment Campaigns Energize the Rank and File

Co-published by The American Prospect
In the wake of the Janus ruling, well-funded right-to-work groups are preparing digital and door-to-door campaigns aimed at California’s public-sector workers.

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Bill Raden

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Union protester outside the Supreme Court last February. (AP Photo/Jacquelyn Martin)

For union organizers, the stakes are summed up by Flint, Michigan, the poster child for a city stripped of a robust public sector
and laid bare to privatizers.


 

Co-published by The American Prospect

The first email arrived a month before the U.S. Supreme Court’s June 27 Janus v. AFSCME decision, which struck a blow against the nation’s public-sector unions. On May 17, all 35,000 teachers in the Los Angeles Unified School District found personally addressed notes concerning their union, United Teachers Los Angeles, titled “UTLA’s new ‘irrevocable’ membership card.” The message had been sent on the district’s computer messaging system.

Sent by “Jami” on behalf of the stridently anti-union Freedom Foundation, the email ominously warned of the “fine print” on UTLA’s new, “Janus-proofed” membership authorization form. “Be aware of UTLA’s financial motivation before granting them the power to garnish your wages indefinitely,” it cautioned before inviting recipients to “pay less” by becoming an agency fee payer. (Agency fees are non-dues moneys collected from all employees to cover the costs of union operations, including contract negotiations, even if the employees don’t belong to union representing their interests.)


“[Janus] is lighting a fire under us, and it’s put us at a crossroads of sorts, where we understand that we have to do things differently.”


A second letter, sent by Amanda Burke of the Betsy DeVos-funded Mackinac Center for Public Policy, arrived in teachers’ inboxes on the very day of the Janus ruling.

“We don’t necessarily believe that just because there are a considerable number of individuals who have not opted out of their union necessarily means that that is their express desire,” explained Mackinac’s vice president of strategic outreach, Lindsay Killen, by phone. “So we want to make sure that we get them the information that they need.”

The emails are just part of the digital and door-to-door campaigns that anti-union groups have in store for California’s government workers. Yet unions have been preparing for Janus for several years and the response from organized labor might represent a paradigm shift that could transform public-sector organizing in the post-Janus world. California has already erupted in a virtual fever of union organizing and membership-building unseen since the public-sector labor movement’s formative heyday in the 1960s and ‘70s.

“It’s basically our new mode of operation,” UTLA’s Strategic Research and Analytics director Grace Regullano explained in a phone call to Capital & Main. “The plan is basically to talk with every single member in our union at some point every year about what the union means, and about recommitting to our union and our fight for public education. … It’s not just that you give us money and we go do the work for you, it’s that we are building power together.”

“This is motivating our union members and leaders to do things that they haven’t done before,” agreed the Los Angeles County Federation of Labor’s organizing director, Chloe Osmer. “[Janus] is lighting a fire under us, and it’s put us at a crossroads of sorts, where I think we understand that because of the attacks on our resources and our budgets, we have to do things differently.”

It’s also paying off. In 2016, 82 percent of UTLA members voted to raise their annual dues by about a third, to $1,000 a year. Though Regullano wouldn’t share specific numbers for UTLA’s ongoing “All In” membership campaign (“to deny the Mackinac Center and the Freedom Foundation a roadmap”), she estimated that organizers had successfully “cut in half” the number of fee-payers that had opted out of joining the union before the campaign.

That jibes with the net membership gains reported around the state by other organizing efforts. Though the campaigns are tailored to the memberships and political culture of each local, to some degree they are all modeled on membership conversations developed by home health care unions after the Supreme Court’s 2014 Harris v. Quinn decision declared unionized caregivers to be only “partial” public employees — and opened them to home visits from paid Freedom Foundation canvassers.

“The home care workers were kind of like the front line for this attack from the Freedom Foundation,” said Osmer. If public sector organizers have an ace in the hole, it may well be the public employees themselves. “The idea is not just, ‘Let’s go out and sign up people to join the union, but let’s identify and recruit new leaders within existing union members and really strengthen our network of member leadership. … How do we do it in a way that really builds long-term capacity and strength for the labor movement?”

The Mackinac Center and Freedom Foundation are betting that unionized workers, now “freed” by the Supreme Court will behave like neoliberal “rational actors” by defecting en masse from dues-paying to free-riding, thereby bleeding the unions. But the recommitment successes California organizers claim to have racked up suggests that the language of the marketplace might be an alien tongue for a workforce in public service.

“People who serve the public are mission-driven,” noted Debra Gabrelle, executive director of San Francisco’s  International Federation of Professional and Technical Engineers (IFTPE) Local 21, the union that represents the city and county professionals and technical engineers. “They’re making sure that we’re all safe.” Local 21’s new “Gold Card” sign-up program invites members to recommit to the union by declaring their intention to remain in it and authorize dues deductions — despite the Janus decision. (Disclosure: The union is a financial supporter of this website.)

Local 21 member Anna Roche is a special projects manager for the San Francisco Public Utilities Commission, where she works on climate change-related issues, including the chronic erosion and sea level rise that are threatening San Francisco’s wastewater infrastructure at Ocean Beach. But she began her career in the private sector as an environmental biologist until a stint as a Peace Corps volunteer made it personally impossible for her to return.

“Dealing with clients that only cared about making money and didn’t really have any interest in protecting the environment just wasn’t very fulfilling for me,” she reflected. “I feel a greater sense of pride and fulfillment knowing that the work I’m doing is to keep San Francisco a place that people are proud of and . . . [that] we’re doing important work to protect the city against changes related to climate change.”

As a volunteer organizer for Local 21’s “Conversations and Cards” campaign, Roche is at the center of one of California labor’s most successful post-Janus recommitment drives. Modeled after the work of the United Domestic Workers of America health care workers, the campaign claims it has already increased her local’s dues-paying membership 11 percent from pre-Janus levels to today’s 91 percent.

“My experience is that people will pretty readily sign, because they’re already union members and they get it, Roche said. “I can understand that people have [problems] with unions, but you have to look at the overall good. The facts are that people that are represented by unions tend to do better in terms of salaries and benefits and treatment.”

If the immediate aim of Conversations and Cards is getting workers to sign Local 21’s new Janus-proofed union “Gold Card,” then the heart of the campaign, Gabrelle emphasized, is galvanizing the recommitment through the employee-to-employee conversation — connecting what’s at stake and the meaning of solidarity to produce a more active and long-lasting union member.

For IFTPE’s organizers, the stakes are summed up by Flint, Michigan, the poster child for a city stripped of a robust public sector and laid bare to privatizers. Flint’s lead contamination water disaster was notoriously abetted by Republican Governor Rick Snyder’s widely condemned emergency manager legislation, which itself was drafted with the help of the Mackinac Center. The irony that the same money from Mackinac’s billionaire funders (Betsy and Dick DeVos, the Walton family, the Koch brothers) is also behind both Janus and the California union-busting campaigns is not lost on IFTPE or Ken Jacobs, the chair of the University of California, Berkeley Center  for Labor Research and Education.

“What people don’t realize is that as much we’re a labor town — there’s been a push to privatize here in San Francisco,” said Local 21 volunteer organizer Frances Hsei, a senior policy analyst for San Francisco’s Office of Civic Engagement and Immigrant Affairs, who has personally signed up 35 Gold Card recommitments. “Unions have been fighting those corporate forces.”

“You go through a wide range of public services, where unions have been a central voice in stopping privatization, the central voice in assuring quality public services,” observed Jacobs. “Look at the Koch Brothers, who have been funding both the anti-union efforts with other billionaires and conservative foundations— their long-term goal had been to destroy public services and shrink government. So unions are an essential part of our democratic system, our democracy.”


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Judging Janus

Unions Get Ready to Fasten Their Seatbelts After ‘Janus’

According to Seattle University law professor Charlotte Garden, today’s Supreme Court decision won’t be the end of the legal assault on the public-sector labor movement.

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Bill Raden

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Illustration: Define Urban

“The most surprising thing was the court’s signaling that it might not be done with big decisions that affect how public-sector unions can be organized.”


 

In what could be the worst setback to workers’ rights since 1947’s Taft-Hartley Act, the U.S. Supreme Court on Wednesday dealt a potentially crippling blow to the nation’s public-sector unions in Janus v. AFSCME. The 5-4 decision struck down Abood v. Detroit Board of Education, the 41-year-old precedent that has allowed public-sector unions to require all employees at a workplace to equally bear the costs of collective bargaining through “agency” or “fair share” fees.

The National Right to Work Legal Defense Fund, on behalf of Mark Janus, a child support specialist employed by the state of Illinois, argued that forcing workers to help pay for even the nonpolitical administrative costs of collective bargaining operations infringes on their First Amendment right to freedom of speech.

The court agreed. Writing for the conservative majority, Justice Samuel Alito said that the agency fee arrangement “violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern.”

At issue now are laws in 22 states that allow fair share fees, as well as employment contracts and a host of workplace rules covering nearly eight million unionized public-sector workers. But the ruling’s crushing financial impact to unions will curtail their ability to lobby and support worker-friendly candidates, who are predominately Democrats.

According to Seattle University associate professor of law Charlotte Garden, today’s court decision won’t be the end of the legal assault on the public-sector labor movement. Capital & Main spoke by phone with Garden in an interview that has been edited for concision and clarity.


Capital & Main: What is the biggest threat to labor from today’s decision?

Charlotte Garden: This decision will have vicious-cycle effects on unions in two ways. One is just the microeconomics: If you’re a worker that’s represented by a union, you now have an economic incentive to opt out of paying dues, even if you like the service you get from your union and value it. Workers who remain members and are still paying may increasingly feel that they are being overburdened by the cost of paying for their free-riding coworkers and then decide themselves to opt out of paying for representation. And so the cycle goes.

On a more macro level, we could easily see this decision contribute to the election of politicians who will reduce the scope of public-sector or private-sector bargaining rights through the legislative process. There’s research showing that right-to-work laws depress Democratic vote share, and so today’s decision can have the potential to harm the ability of working people to elect candidates that will enact policies beneficial to them.

Did the decision surprise you?

The most surprising thing was the court’s signaling that it might not be done with big decisions that affect how public-sector unions can be organized. The court seemed to indicate that it was open to a challenge to exclusive representation, which is the system that is used in the private-sector and in the entire public-sector with the sole exception of teachers in Tennessee.

Doesn’t the decision also open up the possibility that employees within a public-sector workplace could begin suing government employers outside the union, over, say, better benefits or other workplace issues?

Yes — it could well be the case that if a public employer tried to fire or discipline teachers or other public employees that engaged in a walkout or some other collective action, that those teachers would have a much stronger First Amendment defense than they would have had before today’s decision. That raises the question of how consistently the decision is going to be applied, but I agree the argument is there.

In her blistering dissent, Justice Elena  Kagan predicted that overturning Abood would cause real-world chaos for the laws and worker contracts based on Abood. Is that a genuine fear?

I think it is. Justice Kagan points out that in a worst-case scenario — in a contract that doesn’t have a severability clause — this might mean going back to the drawing board on the entire contract. So certainly unions and public employers are facing some turbulent times as they try to grapple with those fallouts of today’s decisions.

There are current court cases that challenge other aspects of public-sector collective bargaining. Here in California, they include Yohn v. CTA, which also targets exclusive representation. Are there other significant anti-labor cases that we should be aware of?

We should expect attacks. States are taking [steps] in response to Janus, doing things like allowing unions to put on orientations for new workers — New York [has] adjusted the scope of the duty of fair representation as applied to nonmembers. I would expect cases challenging all of those innovations on First Amendment grounds.

A former Texas solicitor general who, like most of the conservative majority, is also a member of the right-wing Federalist Society, just brought class action suits in California and four other states, asking for the recovery of all agency fees already paid by dissenters. Does a case like that stand a chance because of Janus?

We have a bit of precedent here. There were a number of lawsuits trying to recover back-dues from before the day Harris v. Quinn was decided, and those cases lost. And so I think it’s likely the same thing will happen here — unions won’t be on the hook for agency fees that they collected before today’s ruling.

How much of Janus is rooted in ideology rather than law? Has something fundamental shifted since the court decided Abood?

It’s undeniable that ideology plays a role in law. One thing is that a Republican president will appoint Supreme Court justices who see law in a way that is favorable to Republicans, and so you’ll get this kind of Balkanization of the judiciary. And then another way that plays out is the kind of attitudes or the receptiveness of different justices to some of the fundamental premises in a case like this.

When looking at the way this conservative court majority has flexed the First Amendment to choke the collective voice of public employees, one can’t help but see it in the light of its 2010 Citizens United decision, which has had a similar partisan political impact. Is that a fair comparison?

Your point about Citizens United is a really apt one. Citizens United freed corporations and unions to participate in politics in this very unbridled way, except that there were already restrictions in place on what money the unions could spend in politics, because of the rule from Abood. Now there’s no equivalent rule for corporations restricting their ability to spend, say, shareholder value when shareholders object. So the supposed parity between unions and corporations in Citizens United was always sort of illusory, and now even more so, because unions are going to have to spend dues money paid by members to fund the representation of free riders instead of other things, including participating in politics.


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Judging Janus

Breaking News: Supreme Court Rules Against Unions in ‘Janus’

Led by Associate Justice Samuel Alito, the five-member majority issued a decision that is the culmination of a multi-year effort that has its roots in right-wing judicial organizations, foundations and think tanks.

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Today’s U.S. Supreme Court’s ruling in Janus v. AFSCME should surprise no one who has been watching its conservative justices’ crusade to undermine the influence of American unions — and the political causes they support. Led by Samuel Alito, the five-member majority issued a decision that is the culmination of a multi-year effort that has its roots in right-wing judicial organizations, foundations and think tanks. These entities correctly determined that the long-term political success of the right would be immeasurably enhanced if unions representing government workers could be weakened.

That’s exactly what the high court’s ruling will do, though the full extent of the damage won’t be known for years, and will depend on the tenacity and creativity of the response by unions and their allies. What we do know is this: A 41-year-old precedent has fallen, one that required workers who decline union membership but nevertheless benefit from collective bargaining agreements to pay “fair share” fees to the unions that negotiate these contracts.

Later today, labor law professor Charlotte Garden will tell Capital & Main readers what the ruling says about the politicization of American jurisprudence, and what lies ahead for public sector unions.

For a deeper understanding of the lead-up to today’s decision, visit Capital & Main’s special section on Janus v. AFSCME.


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Labor & Economy

Santa Cruz Leads the Push for Affordable Housing

California’s housing shortage has made it difficult to be middle class and harder to be poor. Today’s median-priced California home costs more than twice the median-priced U.S. home, according to Zillow.

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Santa Cruz's Victorian Cope Row Houses.

California has been more expensive than most of the country for a long time, but the gap became a chasm beginning in the 1970s.


 

John Holguin should be in a celebratory mood. He is just about to close escrow on his first house. But like too many Californians, he’s feeling a sense of diminished possibilities.

Holguin, 48, works for the Santa Cruz County Department of Public Works, striping roads and maintaining the county’s bridges and storm drains. His wife is a school receptionist, and their combined annual income of $82,000 places them squarely in Santa Cruz County’s middle class.



Yet Holguin had to withdraw from his retirement fund to afford his piece of the California Dream: a house in Watsonville, an agricultural community that has seen home prices shoot up as Bay Area tech workers and investors snatch up homes in the region.

His $3,200 monthly mortgage payment will eat up 75 percent of his take-home pay, he says. When he does retire, eight years later than planned, he and his wife will probably head for Arizona, where some of his high school classmates have already settled.


Activists and civic leaders are recognizing the extent of California’s housing crisis. They are organizing around changes to housing codes, rent control, and local and state bond measures.


Holguin’s two kids, junior college students, will help with the mortgage on the new home, but he does not expect them to remain in the state. “They know if they want to buy something, if they want to succeed, it’s not going to be here in California,” he says.

California’s housing shortage has made it difficult to be middle class and harder to be poor. But there are signs in Holguin’s home county, and elsewhere in the state, that activists and civic leaders are recognizing the extent of the crisis. They are organizing around changes to housing codes, rent control, and local and state bond measures.

At a June 12 Santa Cruz County Board of Supervisors meeting, Supervisor Zach Friend suggested that residents may have “reached a real tipping point” in their willingness to support new affordable housing. He was responding to almost a dozen community, business and nonprofit leaders who spoke in support of the board’s unanimous vote that day to direct staff to prepare revisions to the county housing code to ease the way for more affordable housing development.


“It’s one thing to say that you are in favor of affordable housing,” but when a project is proposed in your neighborhood, “you can find a lot of reasons as to why you don’t support it.”


But it may take time to fix a problem that has been decades in the making, and it will certainly take political will to build and maintain affordable housing in sought-after coastal regions. Santa Cruz activists hope that Friend and other supervisors will vote this summer to place a bond measure of up to $250 million on the November ballot that could fund affordable rental housing, support first-time homebuyers, and provide housing for the homelessness.

Funding and policy changes are only the beginning. City and county officials must greenlight projects, sometimes over neighborhood opposition.

“It’s one thing to say that you are in favor of affordable housing,” Friend noted at the June 12 meeting, but when “a project actually comes forward, especially one in your neighborhood, you can find a lot of reasons as to why you don’t support it.”

California has been more expensive than most of the country for a long time. But the gap widened beginning in the 1970s when home prices grew from 30 percent above national levels to more than 80 percent higher by the end of the decade. Now the median-priced California home costs more than twice the median-priced U.S. home, according to Zillow.

Research suggests that the public “feels the pain” but is “not really enamored by some of the most obvious solutions,” says Jim Mayer of California Forward, a nonprofit organization that focuses on fiscal and government reform. “They’re really not supportive of a whole lot more homes if they think it is going to lead to more traffic and congestion, and more crime, and impact the schools.”

California would need as many as 100,000 more housing units a year than it is currently building to meet the demands of its growing population, according to the state’s Legislative Analyst’s Office.

Meanwhile, some of John Holguin’s co-workers rise in the dark to commute from Los Banos, a small bedroom community some 80 miles east. Others stay with family in Santa Cruz during the week, only to travel 150 miles home to Sacramento on the weekend. (Holguin’s 17-mile commute from Watsonville along Highway 1 will take as long as 45 minutes because of traffic.) “Only in California do we have watersheds and commute sheds,” says Mayer.

“My parents bought their first place at 25, and I’m 48,” Holguin notes. “To me it seemed like they had it easier back then.” He’s right about his parents’ generation of homebuyers. Back in 1975, the median home price in the state was $193,774 (in 2017 dollars). Last year, according to the California Realtors Association, it was $537,860 — nearly three times that much.

Of course, Santa Cruz is a particularly pricey slice of the California real estate market. Its sun, surf and scenery draw tourists, as well as tech industry workers from “over the hill” in Silicon Valley, who have money to spend. The median price for a single family home in Santa Cruz County shot up to $935,100 in March, a record high, the Santa Cruz Sentinel reported.

Santa Cruz County is home to lower-wage agricultural and service industries, making affordability a particular challenge for those who work there. Also, local redevelopment agencies, one of the few funding sources for affordable housing available to local governments, were eliminated in 2012, contributing to the housing shortage across the state.

Small-town Santa Cruz also faces pressure from its University of California campus, whose chancellor announced plans last fall to increase its student body by as many as 10,000 students by 2040. In a sign of voter frustration, the city of Santa Cruz approved a non-binding measure opposing the university’s growth plans by a margin of 76-23 percent.

And then there is the resistance on the part of some residents to accommodate growth. Some simply want to “preserve the open space and restrain the growth” as much as possible, says Don Lane, one of the leaders of Affordable Housing Santa Cruz County, a local coalition that is advocating for a housing bond measure to be placed on the November ballot. “But you’ve just got all this high-priced housing, and it’s still crowded, and traffic is still getting worse.”

Lane, a former mayor of the city of Santa Cruz, says denser “infill” housing in commercial corridors will lead to a more efficient and effective use of space without compromising the region’s preservationist traditions.

The plight of Santa Cruz’s middle-income residents is not as dire as that of its poor, of which there are many. The county has among the highest poverty rates in the state. Farmworkers live in overcrowded and sometimes dangerous conditions. At the June 12 board meeting, Ann López, the director of the Center for Farmworker Families, relayed an instance of 16 people living together in a home of less than 1,000 square feet.

Matthew Nathanson, a public health nurse with the county, was motivated to advocate for an affordable housing ballot measure after witnessing the clients he serves “falling into homelessness” because of their inability to afford rent. The median rent for a two-bedroom home in Santa Cruz was $2,450 a month in May, a 4.7 percent increase from a year ago, the Santa Cruz Sentinel reported.

Nathanson, who is also a regional vice president with Service Employees International Union Local 521, says that housing has become a central issue for city and county workers like Holguin, who are becoming increasingly difficult to recruit. Road workers who are on call during the rainy season need to live “within a reasonable distance” of their jobs, he adds. And pay increases won at the bargaining table risk being “all wiped out” by the cost of housing.

The measure, which would require a two-thirds vote of the public, would be paid for by commercial and residential property owners, according to Lane. The original proposal was for $250 million, but he says the bond measure is now “looking more like $150 million” and could benefit between 1,500 and 2,000 households.

The campaign was inspired by the success of housing measures in Alameda and Santa Clara counties, he says. Another $4 billion housing measure will be on the state ballot this November.

Still, once the funding is in place, the projects will need to get approved by local governments and built. The bond measure proposed for November is only one piece of the puzzle, according to Nathanson.

“It took us a long time to get into this situation,” he says. “I think there is a shift going on, but it’s going to be a struggle.”


Research assistance provided by Jake Conran.

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Culture & Media

‘Skeleton Crew’ Is a Play With a Moral Spine

Set in a Detroit automobile outfitting plant, Dominique Morisseau’s drama grabs you from the start with its focus on blue-collar men and women, and their struggle for dignity and self-respect.

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Deborah Klugman

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Kelly McCreary and Caroline Stefanie Clay. (Photo: Chris Whitaker)

Working-class men and women of color are rarely front and center in today’s media and, likewise, are presented all too occasionally on the American stage. So it’s buoying to see that trend bucked in playwright Dominique Morisseau’s percipient and well-crafted drama, Skeleton Crew. The play is the final installment in her Detroit  Project Trilogy; the first, Paradise Blue, is set in the 1940s amidst displacement caused by urban renewal and gentrification, while the second, Detroit ’67, transpires on the eve of the 1967 Detroit riots sparked by a police action.

Directed by Patricia McGregor at Los Angeles’ Geffen Playhouse, Skeleton Crew is a play with a moral spine. It takes place in 2008, when the shrinking U.S. auto industry is being further downsized. Morisseau’s engaging quartet of characters — Faye (Caroline Stefanie Clay), Dez (Armari Cheatom), Shanita (Kelly McCreary) and Reggie (DB Woodside) – are employed at an automobile outfitting plant. Faye, Dez and Shanita are workers on the line while Reggie (who has a wife and kids, and has pulled himself together after a troubled youth) is their supervisor.

The first three customarily mingle in their break room (designer Rachel Myers’ impressively cluttered, dingy and detailed set), trading the sort of familiar barbs and genuine concern for each other common among longtime co-workers. They also face off on philosophy: Upper-middle-aged Faye and the younger, pregnant Shanita take pride in their labor, while Dez, though a good worker, is a malcontent scornful of management and firm in the belief that everyone needs to watch out for himself. He’s a thorn in Reggie’s side, for while Reggie wants to be supportive of his workers, he must act at the behest of higher management. For his part, Dez resents Reggie’s authority, and a palpable unease exists between them.

Besides this male matchup, we’re made privy to Dez’s attraction to Shanita, who mostly turns away his advances, but every now and then displays a hint of interest. Most poignant is Reggie’s regard and affection for the lesbian Faye, which has roots in his boyhood when she loved, and lived, with his now-deceased mom.

These people’s various predicaments intensify when rumors spread of the plant’s shutdown — a disaster for all, but a particular calamity for the already near-broke Faye who, one year short of retirement, would lose her pension. The crisis forces each of these people to make a choice.

A sound piece of social realism, Skeleton Crew grabs you from the start in its focus on blue-collar men and women, and their struggle against odds for dignity and self-respect. Morisseau not only furnishes these characters a platform for their travails, she endows them with strong values, big hearts and the opportunity to choose between right and wrong.

DB Woodside and Amari Cheatom. (Photo: Chris Whitaker)

Unfortunately, the performance I attended did not soar. Many exchanges lacked a fresh edge. The actors certainly had their characters down, but too often they appeared to be coasting on technique. (This seemed particularly true of Clay, who performed the role to great accolades in Washington, DC in 2017, also under McGregor’s direction). Additionally, some of the stage movement was not entirely fluid; in confrontations, actors sometimes would just stand and face each other in an artificial way. And Cheatom’s interpretation of Dez struck me as a bit overly churlish and depressive: I needed more glimpses of the intelligence and edge that would secretly attract the strong, self-directed Shanita.

The most compelling moments belong to Woodside, well-cast as a man trying his best in difficult circumstances to do the right thing.


Gil Cates Theater at the Geffen Playhouse, 10886 Le Conte Ave., Westwood Village; Tues.-Fri., 8 p.m.; Sat., 3 & 8 p.m. Sun., 2 & 7 p.m.; through July 8. (310) 208-5454 or www.geffenplayhouse.org

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Labor & Economy

Upending the Nation’s Financial Giants With Beneficial State Bank’s Kat Taylor

On the latest episode of “The Bottom Line” podcast, CEO Kat Taylor lays out her strategy for proving that a bank can be profitable, pay its employees well, and pursue an agenda of economic justice and planetary health.

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Photo by Joanne Kim

Before the financial crisis in 2007, the nation’s largest banks reported returns on equity of more than 20%. Even today, in a less frothy time, Wells Fargo maintains a target of between 12% and 15%. But Beneficial State Bank will never surpass 10% when it comes to this closely watched metric—and that’s all by design.

“I don’t think there is another bank who has an upper end on their range of return on equity,” Kat Taylor, Beneficial’s CEO and co-founder (along with her husband, Tom Steyer, the hedge fund billionaire and political activist) told me on the latest episode of my podcast, The Bottom Line. If you’re seeking to maximize profits for your shareholders, she notes, “you’re going to be happy to make as much as you can.

“We disagree with that principally for two reasons,” Taylor adds, explaining that if Beneficial’s return exceeds 10%, “we’re likely either overcharging our customers or underpaying our colleagues”—and that “would be in defiance of our mission.”

Not that Beneficial is cavalier about being financially sustainable. It is aiming for a return on equity of at least 6%—a mark that the bank has reached before and is diligently pushing to hit again as it digests its merger this year with Albina Community Bank. Because of the transaction, Beneficial now has more than 250 employees at 17 locations throughout California, Oregon, and Washington. It boasts about $1 billion in assets.

Of course, that’s miniscule compared with the behemoths of the banking industry, like JPMorgan Chase and Bank of America, each with assets topping $2 trillion.

But Taylor believes that at its current size, or perhaps a bit bigger, Beneficial can help upend the sector by demonstrating that a bank can “thrive competitively,” loan money in a way that boosts “economic justice” and is restorative to the planet, and still pay its workers 150% of a living wage (as calculated by MIT).

“We need to sort of part the waves so that others can follow us,” Taylor says.

Indeed, her theory of change is that as some of the large regional banks see Beneficial’s plan succeeding, they will realize that pursuing a similar path will enable them to attract two increasingly important groups: socially conscious consumers as well as talented employees who “will not take a job in opposition to their values if they can at all avoid it.”

“All of those large regional banks compete with the biggest banks in the system,” Taylor notes, and they may well be compelled to “take up our behaviors and . . . our commitments solely for the purpose of winning what I call the market share wars.”

Taylor grew up with banking in her blood. Her grandfather was the president of Crocker National Bank in San Francisco, and after getting her JD/MBA at Stanford she found her way to Wells Fargo’s credit training program.

But she left Wells after 18 months, going on to raise four children and becoming deeply involved in a number of nonprofits, many of them centered on civil rights—a lifelong passion. Decades passed.

Then in 2004, George W. Bush won the White House, and Taylor and Steyer decided that they would do all they could “to exert progressive values in an unprogressive time.” Among the ideas suggested to them, Taylor says, was to launch a “next-gen banking organization.” They found the notion compelling because banks are “so central to everyone’s life.” OneCalifornia Bank, Beneficial’s predecessor, was chartered in 2007.

Despite her family history and her stint at Wells, Taylor stresses that she was soon plunging into a foreign world.

“I really had very little training to go into banking,” Taylor says. “But sometimes I think that’s a good thing, to have one person in the leadership of an organization who does not think that past is prologue, who does not think this is the way we’ve always done banking so this is the way we’ll always do it going forward.”

You can listen to my entire interview with Taylor here, along with Megan Kamerick reporting on why front-line bank jobs are generally so miserable and Karan Chopra exploring the need for employers and educators to build new bridges in an era of lifelong learning.

 

The Bottom Line is a production of Capital & Main

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Labor & Economy

The Real Costs of Living in California

A new report from United Ways of California shows that 1 in 3 working families struggle to make ends meet.

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These seem to be boom times for Americans, as monthly statistics from the U.S. Labor Department tout a fast-rising economy and dwindling unemployment since the final years of the Obama administration. What those numbers fail to measure is the real cost of making ends meet, and how far out of reach that remains for many working households that continue to struggle.

The reality in California is that one in three households are falling short, according to Struggling to Stay Afloat: The Real Cost Measure in California 2018, a new report from the nonprofit United Ways of California. The study sought to document the actual costs of a “a bare-bones decent standard of living,” says Peter Manzo, president of the nonpartisan advocacy group, and include the real-world impact of housing costs, transportation, education and other immovable factors.

The report is downloadable from the United Ways website, which also has interactive features where each county is examined in detail. In an interview with Capital & Main this week, Manzo explained the report’s findings.


Captial & Main: What inspired this study?

Peter Manzo: The federal poverty level doesn’t really take into account the cost of living in California. It also doesn’t tell you where we would like families to be. It doesn’t show you what is doing OK and how far most households are from it. Everyone knows it can be expensive to live in California, but this adds more detail.

How did you determine what the real costs were?

The real cost measure we used is a basic needs budget: housing, food, transportation, health care, childcare, taxes and 10 percent of the total for miscellaneous – things like your mobile phone bill. The interesting thing about the real cost measure is that the household budget varies by composition. So if you have two adults working full-time minimum-wage jobs, the household budget was different from the same two adults with an infant. The cost structure changes significantly by adding family members.

It looks like different parts of the state are affected differently.

Obviously, coastal areas are more expensive to live in than inland areas in terms of housing. Even so, there are high numbers of households struggling to meet the cost of a decent standard of living in those lower-cost areas. It’s interesting to contrast much of the Bay Area with L.A. County, which has a much higher rate of struggling households: 38 percent of households in L.A. County struggle vs. the composite number across those Bay Area counties, which is about 25 percent. It’s very expensive to live in Santa Clara County, but there are more households that are earning above what they need.

If you look at Fresno County, that’s a very different situation.

On our website, you can look at neighborhood level data. You can look at it by neighborhood, which is real important. With Fresno, you have a high rate of need. And if you look at West Fresno, which sadly is pretty well known for having a very high unemployment rate and a lot of struggling families, it looks worse than other parts of Fresno.

In the Bay Area there is more opportunity, while in Fresno County the opportunities are less and people are struggling at a higher rate than other parts of the state.

Yes. It’s very tough in a lot of place in the Central Valley and the Inland Empire. There are struggling households in just about every part of the state. Every ethnic and racial group struggles. No one’s immune to it.

The Bay Area has been going through a difficult boom period where a lot of people moved in and housing costs went up. L.A. seems to be in the middle of that too. How do those kinds of changes affect people’s ability to keep up?

HUD fair market rent, which is a proxy for actual rents, increased almost 45 percent in the last three years in Alameda County. That’s a steep jump. The Bay Area cost ripple is still going on. L.A. County has rising rents. Our offices are in Downtown L.A., and you can’t turn around without bumping into a crane. In the last three years, there has been an incredible boom in construction. And it seems to be mostly high-market condos that aren’t very affordable and aren’t that well occupied. My sense is that people are buying them for a second home. Obviously we need more housing units, but they need to be affordable. What we want to point out in our study is that we need to do more for renters. There are many more people living in apartments whose rents may go up than would be housed by new construction. Maintaining affordability is key.

How does education play into it?

We see a correlation between a higher level of education and a lower rate of struggle. Households led by college graduates, only 15 percent of those households struggle, compared to 78 percent for households led by somebody who doesn’t have a high school diploma.

How do children in a household affect the ability to keep up?

That’s one of our big findings. A household with kids really changes the budget of what a decent standard of living looks like. Some people would quarrel with us about this, but we feel children should have access to quality pre-school and childcare. We know most kids don’t actually get access to that, but we think they should, and that’s included in our budget. We find that 6 in 10 households with a child under 6 are struggling – especially when they’re led by a single mother.

It looks like in many parts of the state, transportation is also a big cost, approaching the level that people pay for housing.

Our assumption is that families need a car. We talk to people who do studies back east, and often the assumption there is that low-income households are using public transportation. But even in the Bay Area, most people need a car. It’s like a lifeline, to drive around and get to work. It’s a little like Grapes of Wrath: You need to be able to move. Our costs are based on reported expenditures from the Bureau of Labor Statistics. If we had a high functioning public transportation system down here, that would help a lot of people.

These are overwhelmingly working households: 9 in 10 of them have a working adult, and in 80 percent of them the household is working full-time. Oftentimes, when people talk about poverty, they just know what the poverty level is – but it doesn’t really tell you what they’re contending with, and the trade-offs they’re having to make. And there’s often an assumption that poor people are lazy and if they just get a job, things would be better. Our point is that these are overwhelmingly working families. They have jobs and they’re still not earning enough for a decent standard of living.

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